Capital Asset Planning,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥9.69B
• Operating Income: ¥530M
• Net Income: ¥157M
• EPS: ¥69.97

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Capital Asset Planning (3965) delivered a strong FY2025 Q4 (full-year) performance with clear operating leverage: revenue rose 18.5% YoY to ¥9,689m while operating income surged 78.4% YoY to ¥530m. Net income increased 156.3% YoY to ¥401m, lifting net margin to 4.14% and ROE to 10.2% on DuPont metrics. EBITDA reached ¥879m (9.1% margin), supported by ¥349m of depreciation and amortization, indicating sizeable non-cash charges relative to operating income. Cash generation tracked earnings well: operating cash flow of ¥434m was 1.08x net income, and free cash flow was positive at ¥304m after ¥130m investing outflows. The balance sheet is sound with total assets of ¥6,630m, equity of ¥3,930m, and current ratio of 222.7%, reflecting ample liquidity and working capital of ¥2,102m. Leverage looks moderate with liabilities/equity at 0.60x and interest coverage a comfortable 27.7x. DuPont decomposition shows ROE of 10.2% driven by a 4.14% net margin, asset turnover of 1.46x, and financial leverage of 1.69x. Reported gross profit and margin present a data inconsistency: revenue minus cost of sales implies gross profit of ~¥3,238m (33.4% margin), while the disclosed gross profit figure (¥1,728m; 17.8% margin) and calculated metric suggest a lower level; we therefore anchor profitability commentary on operating and net levels. The reported effective tax rate metric (0.0%) appears anomalous given income tax expense of ¥82m; an implied tax rate is roughly 17% using net and tax figures. Dividend payout is currently nil (DPS ¥0, payout 0%), consistent with reinvestment amid growth and ongoing FCF generation. Liquidity looks robust, although cash and equivalents were not disclosed in the dataset; still, positive OCF and FCF mitigate immediate funding concerns. The company’s cyclical exposure to financial-institution IT spending and project timing remains a key business risk, but the latest results suggest healthy demand. Cost discipline and utilization appear to be improving, as evidenced by the disproportionate growth in operating income vs revenue. Overall, the company exits FY2025 with improved profitability, healthy cash conversion, and adequate balance-sheet flexibility, though the noted data gaps (cash balance, equity ratio, share count) and gross margin discrepancy limit precision on certain ratios.

Profitability Analysis

ROE of 10.2% is decomposed into a 4.14% net margin, 1.461x asset turnover, and 1.69x financial leverage. Net margin improved alongside a 156% YoY increase in net income, reflecting strong operating leverage and likely lower non-operating drag. Operating margin is approximately 5.5% (¥530m / ¥9,689m), up markedly given operating income grew 78% against 18.5% revenue growth. EBITDA margin of 9.1% indicates a material non-cash D&A component (D&A ≈ 66% of operating income), which cushions EBITDA but points to ongoing amortization/depreciation from past investments. Interest expense is modest at ¥19m, and interest coverage of 27.7x underscores limited financial drag. Gross margin is unclear due to inconsistency: revenue–COGS implies ~33.4%, while disclosed gross profit and the calculated metric indicate 17.8%; pending clarification, we refrain from drawing conclusions on product/service margin mix. Operating leverage is evident: the revenue delta translated into outsized operating profit growth, suggesting improved utilization, pricing, or mix. Expense control below gross profit line helped expand operating margin despite D&A burden. Ordinary income (¥535m) closely tracks operating income, implying minimal non-operating headwinds. The implied effective tax rate (~17%) appears reasonable relative to JGAAP peers, despite the 0.0% metric in the dataset.

Growth Assessment

Revenue grew 18.5% YoY to ¥9,689m, signaling healthy demand, likely from financial-institution clients and ongoing digitalization. The much faster growth in operating income (+78.4% YoY) points to better cost absorption and utilization, with upside from scale economies. Net income growth (+156.3% YoY) outpaced operating income, suggesting lower non-operating burdens or improved tax dynamics. Sustainability hinges on order backlog, renewal/expansion among core financial clients, and hiring to support delivery without eroding margins; these are not disclosed. The absence of disclosed cash balance is a limitation, but positive OCF and FCF support ongoing reinvestment. D&A at ¥349m indicates prior investment (software, platforms, or capitalized development) is being amortized; maintaining growth will require continued disciplined investment. With asset turnover at 1.46x, growth is being achieved without excessive asset intensity. Near-term outlook is constructive given the operating leverage realized this year; however, revenue visibility (e.g., recurring vs project mix) is not provided, tempering confidence on durability. Pipeline health, client concentration, and project timing will be key determinants of sustaining high-teens growth.

Financial Health

Liquidity is strong: current assets of ¥3,816m vs current liabilities of ¥1,714m yield a 222.7% current ratio and the same quick ratio (inventory not disclosed). Working capital stands at ¥2,102m, providing a buffer for project execution and receivable cycles. Solvency is adequate with total liabilities of ¥2,364m against equity of ¥3,930m (liabilities/equity 0.60x), and assets/equity of 1.69x in line with DuPont leverage. Interest expense is low (¥19m) relative to operating income (coverage 27.7x), indicating limited refinancing risk. Total assets are ¥6,630m, and asset turnover is an efficient 1.46x for a software/IT services profile. Equity ratio was not disclosed (0% in the dataset is a placeholder), so capital structure precision is limited; nonetheless, the provided D/E and coverage suggest conservative leverage. Cash and equivalents were not disclosed; however, positive operating and free cash flow mitigate near-term liquidity concerns.

Cash Flow Quality

OCF of ¥434m versus net income of ¥401m yields an OCF/NI ratio of 1.08, indicating earnings are backed by cash and working-capital movements are manageable. Free cash flow of ¥304m (OCF ¥434m less investing CF ¥130m) is positive, supporting self-funded growth. Investing outflows are modest relative to EBITDA, suggesting disciplined capital deployment or the completion of prior investment waves. The sizable D&A (¥349m) relative to operating income implies notable non-cash charges; the positive OCF/NI ratio reduces concern about earnings overstatement. Working-capital detail (receivables, payables, contract assets) is not provided, but the large working capital base supports execution; monitoring DSO and unbilled receivables is important for services-heavy revenue. Financing CF was small at ¥27m, indicating limited reliance on external funding. Cash balance is undisclosed; we infer adequate liquidity from positive FCF and strong current ratio, but exact cash coverage of short-term liabilities cannot be quantified from the dataset.

Dividend Sustainability

DPS is ¥0 and payout ratio 0%, implying a reinvestment stance. With net income of ¥401m and FCF of ¥304m, coverage for a potential dividend appears feasible, but management opted to retain cash, possibly to fund growth and human capital. Absent a formal policy disclosure, we cannot assess target payout or DOE. FCF coverage of dividends is not applicable this period (0.00x as a placeholder); however, the company generated sufficient FCF that could support future distributions if priorities permit. Given moderate leverage and positive cash generation, capacity for a modest dividend exists, but sustainability would depend on maintaining OCF/NI ≥1.0 and stable capex/R&D. Near-term policy outlook likely favors reinvestment to support growth and platform development, consistent with the elevated D&A profile.

Risk Assessment

Business Risks:

• Client concentration in financial institutions and insurers; budget cycles can delay projects
• Project timing and acceptance risk affecting quarterly revenue and cash conversion
• Talent acquisition and wage inflation pressures impacting delivery margins and utilization
• Shift toward cloud/SaaS economics altering revenue recognition and gross margins
• Cybersecurity and data privacy risks given handling of sensitive financial data
• Competition from larger SIers and fintech platforms potentially pressuring pricing
• Dependence on key partners/vendors and potential changes in licensing costs

Financial Risks:

• Working-capital swings (receivables and unbilled) that could dampen OCF despite profitability
• Limited disclosure of cash balance; liquidity assessment relies on ratios rather than cash on hand
• D&A-heavy P&L implies ongoing reinvestment needs; misalignment could weigh on earnings
• Potential increase in interest rates or credit tightening, albeit current interest burden is low
• Revenue recognition and contract mix changes could affect margin comparability

Key Concerns:

• Inconsistency in gross profit data (17.8% disclosed margin vs ~33.4% implied by revenue–COGS)
• Effective tax rate displayed as 0.0% despite ¥82m tax expense; we estimate ~17%
• Undisclosed cash and equity ratio hinder precise liquidity and solvency benchmarking

Investment Implications

Key Takeaways:

• Strong operating leverage: revenue +18.5% YoY, operating income +78.4% YoY
• ROE at 10.2% supported by improved net margin and efficient asset use (1.46x turnover)
• Healthy cash conversion (OCF/NI 1.08) and positive FCF of ¥304m
• Conservative leverage with interest coverage of 27.7x and D/E ~0.60x (liabilities/equity)
• Profitability improvement despite high D&A, indicating scalable model
• Dividend currently suspended (DPS ¥0), suggesting reinvestment priority

Metrics to Watch:

• Order backlog and new bookings to gauge revenue visibility
• Gross margin reconciliation and mix (services vs licenses/subscriptions)
• OCF/NI ratio, DSO, and unbilled receivables for cash conversion
• Headcount, utilization, and subcontractor ratio for cost control and delivery capacity
• Recurring revenue share and churn/retention among financial institutions
• Capex/R&D intensity vs D&A to assess sustainability of EBITDA
• Tax rate normalization vs one-offs impacting net margin

Relative Positioning: Within Japan’s IT services/financial software peer set (TSE Growth/Prime small-mid caps), CAP shows mid-single-digit operating margin with improving trajectory, moderate leverage, solid cash conversion, and ROE around the peer median; visibility and margin benchmarking are somewhat constrained by disclosure gaps, but operating leverage and balance-sheet strength compare favorably to smaller SI/fintech peers.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis